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Randy Palmer
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Michigan Health Savings Account (HSA)

A Michigan health savings account is basically a high deductible health insurance plan (HDHP) combined with HSA savings account.

Health Savings Account (HSA) A Michigan health savings account is basically a high deductible health insurance plan (HDHP) combined with HSA savings account.

The consumer picks a high deductible insurance plan, and then opens up a health savings account at his local bank. He then can contribute up to a certain maximum amount of money each year into that savings account. The concept is to pay your medical expenses with the money you contribute into your health savings account.

This allows your medical deductions to be paid with pre-tax dollars. Also you are not penalized for taken money out, if you use the funds for qualifying medical expenses. Your health savings account rolls over each year at your local bank where you keep your account.

The medical insurance plan you pick must be a federally qualified high deductible health insurance plan. These health insurance plans have one deductible (single or family). The pro is after you meet your deductible, benefits are paid 100% by the insurance company. Keep in mind, doctor visits and prescription drugs go toward your deductible. So what are the pro's of a health savings account with a HDHP?

- One deductible whether the policy is for you or your family.
- Benefits paid 100% (including doctor visits and prescriptions) if you meet your deductible.
- If you fund your health savings account, this allows your medical deductions to be paid with pre-tax dollars.
- High deductible health plans are usually cheaper than co-pay plans.

Frequently asked questions about Health Savings Accounts

Who can get a HSA?

Anyone under age 65 who buys a qualified high-deductible health policy can open an HSA. You can't be covered by another health insurance policy that isn't a qualified high-deductible plan (either as an individual or a dependent), although you can still have other disability, dental, and life insurance policies.

How much can I contribute annually to an HSA?

In 2014, you can contribute up to $3,300 to an HSA if you have self-only coverage or up to $6,550 for family coverage. If you're 55 or older, you can contribute an extra $1,000 in 2014.

Can any high-deductible health insurance policy qualify for an HSA?

Any high-deductible health insurance policy can qualify, as long as it meets the IRS requirements. In 2014, the deductible must be at least $1,250 for individuals or $2,500 for families, and the annual out-of-pocket expenses cannot exceed $6,350 for an individual or $12,700 for a family, including the deductible and co-payments (but not premiums).

What's the difference between the new HSAs and the flexible-spending accounts?

The tax benefits of both plans are quite similar, but there are several differences. The biggest and most important difference is that your HSA balances can roll over from year to year and continue to grow tax-deferred.

If I set up HSA through my employer, what happens if I switch jobs?

You can keep the money in an HSA account even after you leave that job, similar to a 401(k). But you will get stuck with a 10% penalty -- plus an income-tax bill -- if you use any of the money for non-medical expenses before age 65.

What happens if I want to withdraw the money for non-medical expenses after age 65?

You won't be hit with the 10% penalty if you use the money for non-medical expenses after age 65, but you would still have to pay income taxes on the money. Keep in mind that you can continue to withdraw money from the account tax-free for qualified medical expenses after age 65.

Can a couple who is planning to retire early open an HSA?

Sure. Anyone under age 65 can contribute to an HSA if he or she buys a high-deductible health insurance policy, and you can contribute an extra $1,000 in 2014 if you're 55 or older.

You can't make new HSA contributions after age 65, but you can still use the money in your account tax-free for medical expenses at any age. You'll owe income taxes on the money -- but no penalty -- if you withdraw the money for non-medical expenses after age 65.

Do contributions to an HSA in any way affect one's ability to contribute to an individual retirement account?

No. Your HSA contributions will not affect your IRA limits -- $5,000 per year or $6,000 for those over 50. It's just another tax-deferred way to save for retirement.

Contact us today to see how a Health Savings Account can change your health insurance for the better.

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